We Think VERBIO Vereinigte BioEnergie (ETR:VBK) Might Have The DNA Of A Multi-Bagger

What are the early trends we should look for to identify a stock that could multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of VERBIO Vereinigte BioEnergie (ETR:VBK) looks great, so lets see what the trend can tell us.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for VERBIO Vereinigte BioEnergie:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.48 = €449m ÷ (€1.2b - €263m) (Based on the trailing twelve months to December 2022).

Therefore, VERBIO Vereinigte BioEnergie has an ROCE of 48%. That's a fantastic return and not only that, it outpaces the average of 23% earned by companies in a similar industry.

View our latest analysis for VERBIO Vereinigte BioEnergie

Above you can see how the current ROCE for VERBIO Vereinigte BioEnergie compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering VERBIO Vereinigte BioEnergie here for free.

What Does the ROCE Trend For VERBIO Vereinigte BioEnergie Tell Us?

We like the trends that we're seeing from VERBIO Vereinigte BioEnergie. The data shows that returns on capital have increased substantially over the last five years to 48%. The amount of capital employed has increased too, by 192%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

In Conclusion...

All in all, it's terrific to see that VERBIO Vereinigte BioEnergie is reaping the rewards from prior investments and is growing its capital base. And a remarkable 815% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One more thing to note, we've identified 1 warning sign with VERBIO Vereinigte BioEnergie and understanding it should be part of your investment process.

VERBIO Vereinigte BioEnergie is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.